There are no federal provisions for a sales tax or a value-added tax (VAT); nevertheless, sales and use taxes are a significant source of income for the 45 states that levy such taxes, as well as the District of Columbia. Sales and use tax rates vary by state and typically range from 2.9 percent to 7.25 percent at the state level. Most states additionally provide for a 'local option,' which allows local governments, such as cities and counties, to levy an extra percentage on top of the state-level tax and retain the money.
A sales tax, in general, is a tax levied on the retail sale of tangible physical property, as well as some digital goods and listed services. Although the tax's form may vary, it is often levied immediately on proceeds from the retail sale of the taxable item. In most cases, the person engaged in the business of making retail sales of the taxable item collects the sales tax from the customer and remits it to the state. The use tax is levied in addition to the sales tax and is often levied on purchases purchased outside of the state and brought into the jurisdiction for use, storage, or consumption. Typically, a transaction may be charged with either a sales tax or a use tax, but not both.
The states typically impose a sales tax collection and remission obligation on a seller after a certain number of sales transactions into or within a state, or a certain monetary amount of sales into or within a state, is reached.
Prior to the US Supreme Court's judgment in South Dakota v. Wayfair, liability for state and local sales taxes was controlled by a physical presence nexus test (21 June 2018). That judgment overturned the physical presence nexus requirement and maintained South Dakota's statutory nexus criterion of more than USD 100,000 in sales or 200 or more transactions delivered into the state. Since the ruling, the majority of states that levy sales taxes have adopted similar guidelines.
